Car loan before Mortgage?

[OneDayRicher]

Hello guys!

I have a little dilemma, hope I can get some advice on here.. but here is a little back story. My husband and i were discharged for ch 7 in Nov 2019. He did not reaffirm his car (400/m payment). Interest rates are pretty high also (15-16%).

So in saying that, we do plan on getting a home asap, which should be Nov 2020 or soon after.. Now, my husband wants to get another car, since he didnt reaffirm his current one.. do you think its better to get a car loan one year before applying for a home mortgage?

or shall we wait? I'm not sure how lenders will calculate his current car situation, since he does make 400 a month payment, however its not legally binding, so technically, its not apart of our DTI ratio right? Will this be included??

If anyone has any answers to this. I will be greatly appreciated. Not sure if we should get a new car loan or not, or just wait it out... i feel like waiting it out til after getting a home, will be such a waste of money since we will still be making payments and later getting rid of the car.. but I would like the best case scenario on my side. Any advice will help!!

[justbroke]

As someone who is an employer and has purchased homes, do not purchase a vehicle right before buying a home. It "could" affect both your credit score and your debt-to-income (DTI) ratio. Both are very important I the underwriting process. As an employer, I not only had the lender ask for verification of income (in a writing), but they also did a "quality control" check 2 days after the closing for my employee! I had to once again validate what we sent to them.

When I bought my newly constructed home, I bought a vehicle the day after closing. Many real estate lenders will pull your credit report the day of, or the day before closing to make sure that you're not using credit for your downpayment or that things haven't changed.

Also, you say that you were thinking of buying a new car one year before buying the home, but you list that you'll buy they home in 2020 (this year)? If it's that soon, in November, I would follow the guidance I listed in my initial response. If you're not buying until 2021, then this would be factored into a home purchase in November 2021 as you would have had time to get those payments.

I do not know if the lenders will realize that your spouse still has a car payment today. They can certainly look at motor vehicle records and know that there is a vehicle. They may ask what was discharged as well. Underwriting is very cautiously done especially with the impact of the pandemic.

I'm sure others will give you some ideas as well.

[shipo]

I sense justbroke has the same confusion I do; are you planning on buying a home only a year after a Chapter 7 (i.e. this year) or two years after (i.e. next year)? As I understand it, obtaining a mortgage within two years of a discharge can be challenging.

[OneDayRicher]

Oh my apologies!! I meant we are planning on getting a home by Nov 2021 or soon after... def after the 2 year mark.. lol sorry for the confusion!

But yes! Thanks so much for the advice. I was just second guessing this because from what I've read, the DTI ratio were mainly using monthly debt figures.. and that unaffirmed car was a whooping 400 a month. I am assuming that would be apart of my debt since we pay it monthly... however, It's a car that we are not planning on keeping down the line, as my husband wants to get an SUV instead. But you are right, getting a car right before a home, would probably negatively affect my chances. And a home is WAY more important. So I will take that advice and probably just get another car loan sometime after I land a home.. (hopefully with a decent rate!) Thanks a bunch!!